Current State Of Mortgages and Homeownership WARNING!

This from Dave Stevens, President & CEO of the Mortgage Bankers Association:

Where We Are Today.

We are currently in the middle of a housing crisis.  That’s right…I said it.  Industry experts, economists and even consumer groups have predicted one would emerge, albeit this is not what they expected and it is certainly sooner than anticipated.

Dave Stevens - Mortgage Bankers Association
Dave Stevens – Mortgage Bankers Association

Yes, the word crisis is harsh and alarmist, but it accurately reflects the complete void of focus on housing as an opportunity by Washington policy makers, including the actions of the regulators and enforcement officials that are narrowing the credit box.  Fact – there is a shortage of affordable housing (both rental and owned) and the homeownership rate today is at its lowest point in over two decades.  Today’s environment is not encouraging credit expansion. It’s forcing lenders to be overly conservative – ultimately failing entry-level homeowners on every front.

What’s the number one issue choking off access to affordable credit? Regulating through enforcement and it’s happening on a case-by-case basis.  The guessing game for businesses to know if and when they may be penalized has produced the most defensive lending posture in years. This atmosphere of the unknown; this environment of fear and trepidation rather than an environment of constructive engagement and compliance have a steep cost. And we’re not just talking costs for compliance or production.  We’re talking costs for any mistake, even a minor one that may have no bearing on the efficacy of the loan, making lenders even more conservative in lending.  It’s impacting the willingness of lenders to take the risk even to some who would otherwise qualify for their dream to obtain a home.  The regulatory environment is failing the very borrowers policymakers set out to protect – young families, thriving generations of new Americans, first time homebuyers; all the while driving up rental costs and homeownership lags and rental demand soars.

Lenders must have clearer guidance on the rules and a better understanding of what will constitute an enforcement action.  We have made some progress working with regulators on issues such as rep and warrant, FHA defect taxonomy and the supplemental ratio, but it’s not nearly enough.

Some regulators appear to have an enforcement-first strategy, instead of providing clear rules and guidance – particularly regarding unfair, deceptive, or abusive acts or practices – UDAAP actions – which expose lenders to “regulation by enforcement action.”  Lenders are being subjected to zero-tolerance policies, but don’t have the necessary guidance to comply with some regulations.  Refusal to clarify the rules in writing by the CFPB leaves lenders in a position for massive penalties for minor mistakes.

The CFPB should be applauded for granting an enforcement delay on the TILA/RESPA Integration Disclosure rule (TRID).  With the number of stakeholders involved in home buying procedures, there will undoubtedly be problems.  In particular, the borrower could be affected in many ways should a closing date get pushed back (consider the cost of month-to-month rent or not having a place to go at all).  Industry stake holders – lenders, borrowers, vendors, sellers, title companies, etc., – need time to work through the initial issues before severe penalties compound the problem.

The mortgage lending industry has acknowledged and taken accountability for the role we played in actions that led to the meltdown.  Lenders have paid hundreds of billions in settlements. We’ve also made tremendous change in controls, compliance, and to improve the consumer experience.  Now it’s time policymakers – the vast network at the federal and state level – account for their role in the recovery.  It’s time to acknowledge the flaws in policy, corrections needed to the rules, and the impacts of going too far.

And it starts at the top.  Our President has only given two key housing speeches in his presidency, both in Phoenix. These were focused on enforcement, accountability, and dealing with foreclosure relief and refinance programs. There has been no public focus to promote new opportunities for homeownership and no program, other than the short-lived first-time homebuyer tax credit program, there has been a void in creating confidence in the housing market.

Unlike past Presidents in both parties – there has been no focus on homeownership as an opportunity. No discussion about unbanked, thin file, demographics and how that affects opportunities. No attempt to publicly build confidence in consumers’ views about homeownership.

Unless we call this what it is – a crisis – and focus on the critical role that our national leaders can play, there is no hope of traction. I worry deeply that this Administration may leave office having done less to advance homeownership than any previous administration in memory.  And the clock is running out.  There’s little time left before the next Presidential election to do anything more than public discussion, but the President can and should play a major role.

Let’s fix what needs to be fixed. Let’s change the dialogue of distrust to a dialogue of confidence. Let’s fix the rules to allow for innovative, sustainable, safe lending. Let’s end the relentless enforcement regimes. Give us the confidence to provide access to credit to more qualified borrowers at the lower and middle income levels. Reignite the economic engine of the real estate market.

CFPB cracks down on builder kickbacks

Minneapolis, MN: Have you bought a new construction home and been “forced” or offered an incentive to use the builders lender and title company? It is a big problem that has been round for a long time, that the Consumer Financial Protection Bureau is finally getting around to look at.

Many builders offer “incentives” if you use their affiliated companies for mortgage and title senewconrvices. While this is technically legal – the promises they make, or how the incentives they offer are structured to consumers in order to close a deal and make a profit are generally not legal.

Builders can give you a discount or an incentive to a home buyer provided you don’t make it up anywhere else in the transaction.  But that is the issue. They are always making it up somewhere else. The incentives are rarely “real”.

One example of how this plays out is that when a new home buyer is looking around at other mortgage company or title company options, the builder says he will give you a $4,000 appliance allowance, or $4,000 off closing costs, and their rate today is 3.50% if you use their affiliated company. If you use someone else, they won’t give you the allowance or pay some of your closing costs. Pretty compelling reason to use them.

If you still want to use someone else, it can sometimes get pretty ugly. I’ve heard many customers talk about threats, and even the builder refusing to build the home at all if you use someone other providers.

Once you sign the contract, you are bound to use their affiliated companies.

When the time comes to actually lock the loan 3 to 4 months later, their rate is no longer competitive. I’ve seen the initial offer, which was equal to mind, now be as much as 1/2% higher. By providing the higher rate, they have easily paid for the incentive, and a whole lot more.

The Consumer Financial Protection Bureau (CFPB) last week required that a Texas homebuilder, Paul Taylor, deposit over $100,000 he received in kickbacks from his jointly owned mortgage company into the Treasury. The homebuilder is now banned from future real estate settlement services, including mortgage origination.

The settlement resolves violations of the Real Estate Settlement Procedures Act (RESPA), enforced by the CFPB, which prohibits giving and receiving kickbacks for services, and specifies detailed guidelines for affiliated companies.

Dishonest affiliated business arrangements and kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage. The CFPB said they will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.

Builders beware… The CFPB has you on their radar.

CFPB – LO Compensation Victory

CFPB Proposed LO Compensation Rule Now Open For Public Comments

In case you were not aware, the mortgage industry was very close with having to adjust to a flat fee for compensation. Fortunately, NAMB, in addition to having multiple meetings with top CFPB oficials, was able to get 5 members of 19 SBREFA panelists to represent YOU and the entire industry to help explain why the flat fee was a bad idea.

Here’s a summary of the latest CFPB proposal

In case you are in the mood, please read the 369 page proposal on LO Comp

 Bottom line, here are the victories:

  1. No Flat Fee
  2. LO’s can be compensated on a consumer-paid transaction
  3. Originator qualifications (Bank LO’s need to get licensed!)

Do Your Part – Get Involved and Participate

Every LO should want to comment on this proposal…Public comments are due by 10/16/12 –

Click here for submit your comment – If you will write more than 2000 characters, please attach your comments as a document.

Disparate Impact Still A Problem To Face


CFPB and Frank Dodd costs consumers more to get a home loan

The new CFPB (Consumer Financial Protection Bureau) is destroying the mortgage industry because of the bad Frank / Dodd Financial Reform laws.

This continued government overstepping will again cost the consumer MORE, not less to get ahome loan.

Sign the NO petition at

Comment: “I am an industry professional. The comp rule in Dodd-Frank iis forcing me to overcharge borrowers of higher loan amounts. I also can no longer offer discounts for borrowers who refinance multiple properties with me at a time. Who is helped by this?”

Comment: As a mortgage lender, I have basically stopped doing loans under $100k. The reason, I do not make enough money to justify the time. I am not alone. Fact is this is harming low-end homebuyers. It is FAR too overreaching.

Comment: Frank Dodd, despite all its good intentions, has made it more difficult to obtain a mortgage and more difficult to understand closing costs. It needs to go if we’re looking for housing recovery in earnest.

Comment: I feel strongly that our Congressional Representatives and Senators need to be made aware of the serious adverse effects of Dodd-Frank Act. Dodd-Frank not only harms the financial industry as a whole but more importantly it harms the very group it claims to help, the consumer. I agree that an independent evaluation should be conducted and due diligence should be done before any additional initiatives of the Dodd-Frank Act are implemented. If this is done objectively, our leaders will see that the only true solution is to eliminate Dodd-Frank all together.

New Mortgage Statement to eliminate confusion?

Classify this under Government solution without a problem.

Under the 2010 Frank – Dodd Financial Reform Act came a lot of mandated changes that won’t fix anything, but created a lot of extra paperwork and bottlenecks for the housing and mortgage industry. One of those items was the creation of the Consumer Financial Protection Bureau.

I just read that the CFPB is out to make reading your monthly mortgage statement easier!  Was this really a problem? I’ve had plenty of mortgage loans from all sorts of different servicers, and I’ve never been confused.

According to many consumer protection group, confusing monthly statements has been a huge contributor to the current housing mess.  Huh??  I’m not fan of the large banks, but is this really a problem the government should be mandating?

The CFPB is apparently required under the 2010 law to put new mortgage servicing rules in place to help consumers. The law has specific requirements for mortgage statements, including a phone number and email address for the customer to get information about the loan, as well as information about housing counselors.

The newly created Consumer Financial Protection Bureau has finally developed a proposed new one page “standardized” monthly mortgage statement supposedly designed to provide clear information about your loan.

The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.

Many servicers already provide such information on monthly statements, but there are no industrywide standards.  Initial reaction from servicers to the agency’s proposal was positive.

You can see a working draft of the standardized statement on its website,, and give  input before a version of the form formally is proposed this summer.

WE EMPLOY PEOPLE TO DO THIS?  This is what is wrong with this country!

What do yo think?



New Consumer Financial Protect Board goes live today

New Consumer Financial Protect Board goes live today. The CFPB is part of last years Dodd / Frank financial reform disaster bill. In theory, the new agency sounds great. The reality is something completely different.

For starters… they are already going after the wrong people…

Here is another great video from the boys over at TBWS.

Thoughts? Log in and post!

The newest NEW Good Faith Estimate for 2011

On January 1, 2010, the government came out with a new Good Faith Estimate document for home buyers. The new document, supposedly designed to help consumers better shop for a mortgage, was and is a complete flop.

A year later, they are testing a new, new Good Faith Estimate from the new Consumer Financial Protection Bureau. You can give your input to the CFPB… Watch to learn how.

What do YOU think? Is this one a flop too? Post below!